The private credit market is not heading for a systemic crisis. But it is heading for a separation.
The headlines have been dramatic. BlackRock capping redemptions on its $26bn HPS Corporate Lending Fund. Blue Owl restricting withdrawals. UBS warning default rates could climb to 13% in an aggressive disruption scenario. The narrative: private credit is a bubble waiting to burst.
While the narrative may be overblown (depending on your viewpoint), it is not entirely wrong either.
What we are witnessing is the beginning of a meaningful dispersion between managers who have underwritten with discipline and those who have not. The stress is concentrated, not systemic. Software and tech-adjacent borrowers, many financed at peak valuations between 2021 and 2023, are genuinely vulnerable to AI disruption. PitchBook data shows software accounts for approximately 17% of BDC investments by deal count. Some of those loans will default. But that concentration risk is not evenly distributed.
Ares has been explicit: software represents roughly 6% of total AUM and less than 9% of private credit AUM, focused on foundational infrastructure software in regulated industries. That is a fundamentally different risk profile from a manager with 70%+ software concentration.
What interests me most is the push by Apollo Global Management, Inc. toward transparency. Marc Rowan has stated publicly that managers need to make valuations more transparent to court institutional capital. Apollo is now preparing to report credit fund NAVs monthly, with a long-term ambition of daily NAVs and third-party valuations. They traded almost $10bn of high-grade private loans last year and are building a marketplace for real-time pricing. The managers with clean books will welcome this. Others will not.
This matters directly to the insurance investment market we cover at Laz Partners. Apollo, Brookfield, and Blackstone have all embedded themselves into UK insurance capital over the past 12 months.
The private credit flowing into insurer balance sheets, structured for MA eligibility, investment-grade, and regulatory-compliant, is a fundamentally different proposition from the leveraged software loans generating the headlines. But the talent required to structure, assess, and manage these portfolios remains one of the thinnest pools in the market.
Our view at Laz Partners: Private credit is maturing, not collapsing. The winners will be defined by underwriting discipline, transparency, and the ability to serve institutional capital with assets that meet specific regulatory and duration requirements. The dispersion between those managers and the rest will only widen from here.
As always, very open to hearing thoughts from others in the market, as this is a topic that has been coming up a lot in recent discussions with both clients and candidates.
